Posting Journal Entries to Ledger Accounts
The second step of accounting cycle is to post the journal entries to the ledger accounts.
The journal entries
recorded during the first step provide information about which accounts
are to be debited and which to be credited and also the magnitude of
the debit or credit (see debit-credit-rules).
The debit and credit values of journal entries are transferred to
ledger accounts one by one in such a way that debit amount of a journal
entry is transferred to the debit side of the relevant ledger account
and the credit amount is transferred to the credit side of the relevant
ledger account.
After posting all the journal entries, the balance of each account is
calculated. The balance of an asset, expense, contra-liability and
contra-equity account is calculated by subtracting the sum of its credit
side from the sum of its debit side. The balance of a liability, equity
and contra-asset account is calculated the opposite way i.e. by
subtracting the sum of its debit side from the sum of its credit side.
Example
The ledger accounts shown below are derived from the journal entries of Company A.
Asset Accounts
| Cash | | Accounts Receivable |
| $100,000 | $36,000 | | $21,200 | $15,300 |
| 28,500 | 60,000 | | | |
| 32,900 | 17,600 | | | |
| 15,300 | 19,100 | | | |
| 4,000 | 19,100 | | | |
| | 5,000 | | | |
| | 3,470 | | | |
| $20,430 | | | $5,900 | |
| Office Supplies | | Prepaid Rent |
| $17,600 | | | $36,000 | |
| 5,200 | | | | |
| $22,800 | | | $36,000 | |
| Equipment |
| $80,000 | |
| $80,000 | |
Liability Accounts
| Accounts Payable | | Notes Payable |
| $17,600 | $17,600 | | | $20,000 |
| | 5,200 | | | |
| | $5,200 | | | $20,000 |
| Utilities Payable | | Unearned Revenue |
| | $2,470 | | | $4,000 |
| | 1,494 | | | |
| | $3,964 | | | $4,000 |
Equity Accounts
| Common Stock |
| | $100,000 |
| | $100,000 |
Revenue, Dividend and Expense Accounts
| Service Revenue | | Dividend |
| | $28,500 | | $5,000 | |
| | 54,100 | | | |
| | $82,600 | | $5,000 | |
| Wages Expense | | Miscellaneous Expense |
| $19,100 | | | $3,470 | |
| 19,100 | | | | |
| $38,200 | | | $3,470 | |
| Electricity Expense | | Telephone Expense |
| $2,470 | | | $1,494 | |
| $2,470 | | | $1,494 | |
The ledger accounts step of accounting cycle completes here. The next step is the preparation of unadjusted trial balance.
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